This chapter reviews how the current recession affects the prospect for structural reform and then explores which of the policy priorities identified in the current volume to boost long-term growth are most likely to stimulate demand in the near term. The main conclusion of the chapter is that there are, indeed, growth enhancing structural policies in nearly all OECD countries that could potentially enhance short-term, as well as long-term, growth.

Until the present downturn, there had been an improvement in the pace of convergence in GDP per capita of OECD countries relative to the best performing countries. Nevertheless, underlying performance weaknesses remain in many countries. This chapter provides an overview of broad long-term trends in economic performance and an updated set of policy priorities that have been identified in each country to address specific performance weaknesses. Many of the policy priorities that were deemed important two years ago still remain important in 2009. In particular, an emphasis on productivity-enhancing reforms remains, especially for the lower income OECD countries, with an increased emphasis on measures that enhance human capital. Although labour utilisation improved until recently in many countries, reforms of tax and benefit systems are identified as priorities in a large number of them.

Chapter 3. Country notes

This chapter provides more detailed information on key policy priorities for individual OECD member countries and for the European Union.

This chapter contains information about the progress in implementing reforms in line with the 2009 priorities (2008 country notes) for individual OECD member countries and for the European Union.

This chapter contains comparative OECD indicators for labour costs and labour taxation; unemployment, disability and sickness income support; labour market and product market regulation; barriers to competition, trade and investment, sectoral regulation, educational attainment and achievement; health expenditure; and public investment. These indicators have been used to identify the policy priorities that are discussed in this report. (See also: Indicators of Product Market Regulation Homepage)

Part II: Thematic Studies

Chapter 5. Taxation and economic growth

Tax systems differ widely across OECD countries and these variations explain part of the differences in economic performance and, in turn, differences in living standards. This chapter examines how to design tax systems to be less of a drag on economic growth. Corporate taxes are found to be the most harmful for growth, followed by personal income taxes, and then consumption taxes. Recurrent taxes on immovable property appear to have the least impact. A revenue neutral growth oriented tax reform would, therefore, be to shift part of the revenue base from income taxes to less distortive taxes such as recurrent taxes on immovable property or consumption.

Chapter 6. Infrastructure investment: links to growth and the role of public policy

Infrastructure performs a vital role for the functioning of the economy. However,investments in the past have sometimes been wasteful. This chapter first assesses the impact of investment in energy, water, transport and telecommunication networks on the economy, showing that it has had effects on output over and above those of other types of investment. However, this relationship does not hold for all countries and types of infrastructure, and may have become weaker more recently. Policies that support a competitive environment, bolstered by greater independence of regulators and transparent decision making, determinies whether public or private investment is more appropriate. Such policies help to ensure more efficient investment in infrastructure.

This chapter presents patterns and developments in regulation that affect competition in product markets of OECD countries over the past ten years, using the updated and substantially revised OECD indicators of product market regulation (PMR). It shows countries’ relative regulatory positions in 2008, assesses the extent of regulatory reforms, analyses the role of reforms in particular sectors for reforms in aggregate PMR, and points to the potential for future reform.

The composition of the working-age population can influence aggregate employment and average productivity because both employment rates and productivity levels vary across population groups. This chapter assesses the quantitative importance of the working-age population broken down by age, gender and education in explaining differences in employment and productivity levels across countries. Differences in population structure are found to contribute importantly to variations in both labour utilisation and productivity performances. Combining these mechanical effects, differences in the composition of the working age population account for around a third of the gap in GDP per capita for Europe (EU15) relative to the United States, mainly due to differences in educational attainment.